1997 Reports

Network affiliation and supplier performance in the Japanese automotive industry

Ahmadjian, Christina L.

This paper examines the performance of 126 Japanese auto parts suppliers and four automakers between 1980 and 1993. Contrary to the dual economy perspective, auto parts suppliers perform on average no worse than automakers. Contrary to resource dependence theory, suppliers that supply a large proportion of their output to a single customer do no worse than more independent suppliers. Instead, customers buffer their closest suppliers against exogenous shocks and redistribute profits between high and low-performing suppliers. Redistribution makes economic sense, as it encourages suppliers to make customer-specific investments. At the same time, it is embedded in the cultural context, social relations, and institutional environment of Japan.